How is Low Inventory and High Demand Affecting the Real Estate Market in Cambridge and Somerville?

When demand exceeds supply in the real estate market prices appreciate. Inventory data and our anecdotal observations of the many bidding wars leads us to conclude that the real estate market in Cambridge and Somerville has moved into an appreciating cycle.

* Data is from March 22, 2013. Source: MLSPIN

Buyers

Many listings in Cambridge and Somerville are attracting from 10 - 30 offers. This number of offers clearly indicates the imbalance in the marketplace. Buyers are far exceeding the available inventory. In many cases winning offers are exceeding the asking price by 10 - 25%. Winning offers are often all cash with no inspection contingency.

Renters

According to the manager of RE/MAX Destiny's rental department, Tim Schmidt: "Rents remain at about the same high levels as last year with lower rental inventory. I think renters are reluctant to move for fear of losing their good rents. Incoming tenants are paying the full fee. New markets (like Chelsea) are emerging because of high rents in Cambridge, Somerville, and surrounding towns.

Investors

Since returns for many fixed rate investments are low, many investors are choosing to put their cash into real estate. Since there is high demand for investment property, sale prices are increasing. The competition for multifamily homes is especially strong. There have been 20 - 30 offers for multifamily homes in strong rental locations. If rents do not increase, rates of return may be reduced in the near future. Developers

For developers that are listing their properties for sale, the current market continues to be highly favorable. However, some developers are putting on over priced listings. Even in a seller's market over priced listings are not selling.

Acquiring a property for development is a huge challenge. Inventory is extremely constrained and viable development opportunities are receiving an overwhelming number of offers. Offers with financing or inspection contingencies are usually not being considered. Developers are competing with income investors that are often willing to pay a higher acquisition price.